The EUR/USD pair on Monday continued to trade between the levels of 1.0764 and 1.0806, with two additional levels in between - 1.0785 and 1.0797. Thus, the pair found itself in a challenging zone from which it would be quite difficult to break out. Yesterday's rebound from the corrective level of 61.8% (1.0806) did not allow the bulls to continue their attacks within the ascending trend channel. A decline towards the level of 1.0764 and the lower line of the corridor may begin as early as today. I do not expect a significant decline of the European currency below the channel before the close.
The wave situation remains unchanged. The last downward wave ended on May 1st and failed to reach the low of the previous wave, while the new upward wave has already surpassed the peak of the previous wave and continues to form. Thus, a "bullish" trend has formed, but its prospects personally raise doubts for me. Over the past 2-3 weeks, the news background has supported bullish traders, but whether it will continue to do so is uncertain. The economy of the European Union is going through difficult times, and the ECB is ready to start easing its monetary policy much earlier than the Fed. A break of the low from May 1st is required to change the trend to "bearish."
There was no significant news background on Monday, but traders won't complain about the lack of news today. In Europe, the news will be secondary. In the morning, it became known that the final inflation figure in Germany for April remained unchanged at 2.2% year-on-year. In the European Union, inflation is slightly higher but still very close to the ECB's target level. Therefore, expectations for a reduction in the ECB's interest rate in June have not changed. Jerome Powell will speak during the day, and his speeches are usually eagerly awaited by the market. If Powell again mentions high inflation and uncertainty about the timing of the start of monetary policy easing, bears may finally make the anticipated advance.
On the 4-hour chart, the pair has returned to the upper line of the "wedge." A new rebound from this line will again favor the US dollar and lead to a new decline toward the corrective level of 23.6% (1.0644). Consolidation above the "wedge" will increase the probability of continued growth towards the next Fibonacci level of 50.0%–1.0862, but at this time, I cannot consider this closure to have occurred. There are no imminent divergences observed today.
Commitments of Traders (COT) report:
During the last reporting week, speculators opened 3409 long contracts and closed 7958 short contracts. The sentiment of the "non-commercial" group turned "bearish" a couple of weeks ago, but now there is a balance between bulls and bears. The total number of long contracts held by speculators now stands at 170,000, while short contracts amount to 166,000. However, the situation will continue to change in favor of the bears. In the second column, we see that the number of short positions has increased from 140,000 to 166,000 over the last three months. During the same period, the number of long positions decreased from 202,000 to 170,000. Bulls have dominated the market for too long, and now they need a strong news background to resume the "bullish" trend. A series of poor reports from the US have supported the euro, but in the long run, more is needed.
News Calendar for the US and European Union:
European Union - Consumer Price Index in Germany (06:00 UTC).
European Union - ZEW Economic Sentiment Index in Germany (09:00 UTC).
US - Producer Price Index (12:30 UTC).
US - Speech by Federal Reserve Chairman Jerome Powell (14:00 UTC).
On May 14th, the economic calendar contains several entries, among which Powell's speech stands out. The impact of the news background on trader sentiment for the remainder of the day may be moderate.
Forecast for EUR/USD and Trader Advice:
New sales of the pair are possible at a close below the level of 1.0764 on the hourly chart, with the target being the lower line of the ascending corridor. I would only consider buying the euro once the pair closes above the level of 1.0806 on the hourly chart, with targets at 1.0840 and 1.0874. Additionally, buying is possible in the event of a rebound from the lower line of the ascending channel.
